About four years ago we have established a London based finance company, through which we provide bridge finance loans to London based investors and business owners, secured with London real estate.
The loans range between £100,000 to £1,000,000 (average £350,000) for minimum 3 months and maximum 12 months periods (average 8 months) and we charge around 1% interest per calendar month.
The loans are secured against London real estate with a maximum 70 % for first charge residential (average 50%) loan to value. Valuations are produced by external independent chartered surveyors, from our panel and also by our internal property professionals based on comparable sale prices.
We carry out the due diligence and underwriting ourselves with our own lawyers and bankers being part of our team and provide the loans with our own funds.
Volumes have picked up and we currently lend out about 2 – 4 million per month.
Investors acquire existing loans from us; we charge the borrowers 10-12% and we may assign 6-8% to the investors (depending on LTV), retaining around a 4% margin and the loan administration till full redemption. Upon loan redemption the investor may decide to receive the funds or re-invest them by acquiring another loan receivable from our loan book at the time.
Therefore the investment is sterling denominated, the return is about 6-8%, with short investment periods between 3 – 12 months and the underlying risk being the London real estate market, with a 30% + safety cushion.
MAIN PRODUCT INDICATORS
|RANGE OF RETURN||6%-8%|
|RANGE OF LOAN SIZE||£100,000 - £1,000,000|
|AVERAGE LOAN SIZE||£270,000|
|RANGE OF LOAN DURATION||3-12 months|
|AVERAGE LOAN DURATION||8 months|
|SECURITY||First or second charge over residential and commercial property in UK (M25).|
FINANCIAL RELATIONSHIP AND LEGAL STRUCTURE
As you may know, in the UK if there is a loan default for non-primary residence loans then we can appoint a receiver without having to go through the court and get possession of the property. Then the receiver will sell the property through a real estate agent or an auction. The sale is fast since the London real estate market is very mature and liquid. The whole process takes between 3 – 6 months with all the principal, interest and relevant fees and costs covered from the sale proceeds. Only one of the loans we have rendered during the four years defaulted, with a subsequent successful settlement.
Investor protection is set out in the equitable assignment.
The investor has the right to the assigned amount (principle) and related rights (interest).
In case security is enforced, the assignee (investor) receives the assigned amount and related rights before payment of surplus to the borrower.
CONSULCO GROUP PROFILE
The group is in operation since 1993, and is one of the most successful and largest tax consultancy firms in the European and CIS markets for over 20 years. Consulco Limited 200 plus staff currently manage over 4.500 companies.
The group has expanded into UK based real estate since 2010, currently managing assets over STG £65 million, mostly group owned, and spread over commercial and residential properties as well bridge finance. The firm continues to be owner operated.
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